Optus must allow customers misled by ad to cancel service

Optus customers who signed contracts after seeing a January ad comparing the sizes of the Optus and Telstra network should be allowed to cancel their contracts without penalty, the Supreme Court of Victoria has ruled.

The action follows the court’s ruling that Telstra was right to complain about an Optus ad claiming the reach of the Optus network was nearly the same as the Telstra network.

The ad had said the Optus network is less than 1 per cent smaller than the Telstra network. After the ad aired and Telstra complained, Optus claimed it was talking about the percentage of population reached. But Telstra said the ad misled consumers into thinking the comparison was about geographic area.

While the population reach percentage is similar between the companies (99.3 per cent for Telstra, 98.5 per cent for Optus), the Telstra network covering 2.3 million square kilometres is more than two times as large in area as the Optus network across 1 million square kilometres.

The court ruled that Optus must send a letter within 7 days informing customers about the misleading nature of its ad and providing the opportunity to cancel their contract.

The letter will be sent to all customers who entered into a post-paid plan with Optus from 26 January until 16 May this year, the court said in an order released today.

“Such persons ought to be informed of the true position in relation to Geographic Coverage, and also ought to be able to cancel any contract entered into with Optus if reliance has been placed upon any of the representations,” Victorian Supreme Court Justice James Elliott wrote.

“The contracts entered into are ordinarily for a lengthy period of time, usually for 12 or 24 months, and the sums involved are not insignificant.”

Also, the court ordered the Optus to make declarations correcting its ad. This had been requested by Telstra and was not opposed by Optus.

“In this case there has been a real controversy,” Elliott wrote. “In my view, it is appropriate that declarations be made in circumstances where the court has found that Optus has deliberately engaged in conduct that significantly contravened the Australian Consumer Law for a material period of time.”

“The declarations will clearly identify the contravening conduct, will publicise the type of advertising that constitutes a contravention and provide a warning to business not to engage in misleading or deceptive conduct, or make false or misleading representations.”

“In particular, the declaratory relief will aid in consumers being protected from making ill-informed decisions concerning long-term contracts for mobile phone plans.”

However, the court modified the specific declarations Optus needs to make from what Telstra requested. The declaration should address the issue of geographic coverage in percentage terms, the court said.

“The court will make declarations which make it clear what the true position is, both in terms of square kilometres of geographic coverage and also the proportion of the Australian land mass that is covered by the respective networks,” the judge wrote.

“Anything less than this may allow a misleading message or impression to remain.”

Optus must also issue corrective advertising, the court ruled. Optus had argued it should not need to do this because the original ad was last aired more than 30 days ago on television, but the court disagreed.

“This judgment will be delivered less than 6 weeks after the advertisement ceased being broadcast … By comparison to other cases in which corrective advertising has been ordered, the delay is relatively insignificant.”

“Certainly, given the nature, extent and intensity of the advertising in question ... the length of time, of itself, does not suggest that the misapprehension created by the advertisement would have now lapsed.”

The corrective advertising should appear in newspapers, websites of newspapers and displayed inside Optus shops at the point of sale and on Optus webpages, the court said.

In a statement, an Optus spokesman said the telco is currently considering its options.

“While we’re disappointed in the court’s ruling, Optus remains committed to the strength of our network.”

“We have been consistent and transparent in how we communicate the less than 1 per cent difference in the population reach of the Optus mobile network compared to Telstra’s, and these clear facts have not been in dispute.”

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